6 Things You Should Know About Relationship Marketing
Relationship marketing plays a crucial role in increasing customer lifetime value, the amount of value a customer contributes to your business from their first purchase towards their last. Read on to find out the things you should know about relationship marketing and why you should consider this approach.
Focusing on building valuable and lasting relationships with customers improves retention. And customer retention is becoming more important these days, especially when businesses aspire to grow.
Multiple studies found that improving customer retention by at least 5% helps in increasing revenue by 25% to 95%. It’s also more cost-effective. Engaging existing customers for retention has been shown to be at least 6-7x cheaper than acquiring new ones.
What do these numbers mean? All of these mean that in order for companies to increase their sales, cut their expenses, and grow their profits, they should find ways to build customer loyalty and reduce customer churn. And one proven way to do this is through relationship marketing.
What is Relationship Marketing
Relationship marketing is the process of building long-term personal, individualized connections with customers. It focuses on providing value and relevance through content, product, and services for a continuing, lasting relationship.
Companies that implement relationship marketing seek to get to know a customer better to improve their experiences with the company. They do not stop after a deal is closed.
In fact, they continue to reach out to the said customer by sending relevant content, personalized offers, and discounts to encourage repeat purchases and consequently increase the chances of customer retention.
The way relationship marketing works is often illustrated with customers going through a lifecycle process. They start by discovering the brand and end up becoming advocates of that brand.
Learn more about relationship marketing here: What is Relationship Marketing and Why is it Important?
Examples of Relationship Marketing
The following are examples of how relationship marketing works:
IKEA is one of the few companies that focus on relationship marketing as a primary means of growth. It is considered the world’s largest home furnishing retailer and has more than 400 stores worldwide.
The company is famous for using demographic, psychographic & geographic segmentation to provide personalized experiences to customers and offering value at every stage of the buyer’s journey. It gives importance to customer retention, establishing loyalty, and building long-term relationships with its customers.
To “deliver a clear, consistent, and compelling message about the organization and its product,” IKEA uses a combination of experimental marketing, customer engagement and content marketing, and digital marketing and social media engagement, among others.
Starbucks didn’t just rise to the top because of good coffee. The company has been known to provide excellent customer experiences that make it easy for them to be the topic of conversation.
Starbucks starts with providing customers with comfort and peace at their stores— a different feeling that customers don’t commonly get elsewhere. A personalized product option is then offered to every customer— whether they want 2 pumps of syrup, soy milk to replace dairy milk, a scoop of java chips, or anything else added to their drink.
Starbucks communicates with its customers via text, email, and direct mail. There, they provide content to customers and also open accessibility for purchase. Starbucks also allows customers to turn their mobile phones into electronic rewards cards to redeem free drinks, a birthday gift, or a free sample menu item.
Amazon’s success story rests primarily on its ability to provide a customer-centric experience to its over 300 million customers.
The company built its own Customer Relationship Management (CRM) software to collect customer data, such as location, searched items, and previous purchases, to instantly modify and personalize users’ on-site experience.
Amazon uses email to connect with customers and keep them purchasing. They also have the Prime customer loyalty program where customers get free and fast shipping, free cloud storage, and free streaming services, among others, by paying extra for membership.
6 Things You Should Know About Relationship Marketing
When talking about relationship marketing, here are six things that you should know about:
1. Personalization is key
Personalization is the process of crafting an experience or message to match a recipient’s needs, interests, and other factors, based on the data the company has gathered.
For example, if the customer has searched for hair products in the past few minutes, it’s likely that the customer needs a hair product or is interested in buying one. Having this data allows companies to offer relevant product recommendations which increase the chances of the said customer making a purchase.
Personalization is key to a relationship marketing’s success. Companies need to be able to offer relevant and valuable information for customers to continue to interact with them. When a brand’s product and services do not match the customer’s needs, interests, or preferences, it’s likely for a churn to occur.
2. Repeat customers are more likely to spend more
A study found that repeat customers spend three times more per transaction compared to non-repeat customers. They’re also easier to sell to, which means that in relationship marketing, retaining customers is more important than anything else.
When repeat customers become advocates of your brand, they’re not just there to make repeat purchases. They’re also there to influence others to make a purchase, spreading good word-of-mouth marketing to promote your brand and increase your sales revenue.
3. Technology is an advantage
Improving customer relationships through personalization would be impossible without technology. Technologies like CRM software allow companies to seamlessly collect and sort customer data for instant use.
CRMs help inform sales and marketing teams what a customer needs, what they’re likely to purchase, and what to do to encourage them to make a purchase. With CRM tools and features, companies can also automate tasks involving personalization such as email marketing, catalog offering, and customer profiling, among others.
4. Everybody loves incentives
To keep customers engaged, companies need to keep sending content that helps customers maximize the use of their purchased products or encourage them to browse for other products for enhanced use and experience.
But nothing engages customers more than incentives. Incentives can take the form of discounts and freebies.
Many companies incentivize their customers through a loyalty program, where customers gain points with every purchase. These points can be exchanged for free items and products.
Each purchase allows the company to gain more details about the customer— their needs, preferences, and other information that can be used to provide a more personalized experience to the said customer.
5. Customer feedback and insights are game-changers
Building a good relationship is a two-way street. Companies guestimating what customers need wouldn’t suffice. Customers also have to contribute and inform companies what they think, feel, and experience when using their products and services.
To encourage customers to provide real feedback, companies have to find ways to reward honesty, make providing feedback accessible and convenient, and be transparent about how the feedback would benefit the customer.
6. Provide a multi-channel experience for every type of customer
For companies to truly capture every type of customer’s interest, they need to be sensitive about their marketing channels— how the customers found out about them and how these customers interact with them.
This way, the company can map the whole experience of the customer and look for ways to improve this experience. A different journey may then be provided for a customer that used online marketing channels compared to traditional marketing channels.
Because customers nowadays use more than one marketing channel, companies have to provide a consistent multi-channel experience (omnichannel marketing) to all customers.
Customers expect a consistent, quality experience throughout and that’s why the brand’s identity and values should be unified and consistent as well across these channels.
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